Bank of England to Cut Interest Rates Twice More in 2025, Pantheon Macroeconomics Predicts

Bank of England Expected to Cut Interest Rates Twice More, Says Pantheon Macroeconomics

Pantheon Macroeconomics predicts that the Bank of England (BOE) will reduce interest rates a second and third time over the coming months as the UK’s labor market loses momentum. While unemployment is gradually rising, and pay growth continues to increase, the BOE is expected to hold off on consecutive rate cuts due to underlying inflation concerns.

Rob Wood, an economist at Pantheon Macroeconomics, explains that while the labor market is softening, the BOE has room to implement two more rate cuts this year, following previous reductions in February and May. However, despite the gradual weakening of the jobs market, inflationary pressures from rapid pay growth remain a key concern, which will prevent the central bank from taking immediate, consecutive actions.

Wood suggests that the BOE will be cautious in its approach, aiming to strike a balance between addressing labor market softening and keeping inflationary pressures under control. Given the complexities of the current economic landscape, the central bank is expected to act prudently, ensuring that rate cuts occur with a careful consideration of the broader economic implications.

As the jobs market continues to cool, the BOE's next steps will depend on how inflation and wage growth evolve over the next few months.